Understanding Forex Trading and How it Works

The term “Forex” comes from the combination of “foreign currency” and “exchange,” and its meaning is obvious. By far the FX trading market is the largest in global financial markets. The estimated daily trade volume across all global hubs is USD 6 trillion. Visit MultiBank Group

Unlike stocks and commodities trading, Forex traders buy and sell currency pairings based on their predictions of future market movements. Currency trading is different from stock trading in that you are not only purchasing one currency but selling another at the same time. Opening a currency trading account will allow you to participate in online Forex trading.

Who are Forex Traders

There are two main categories of people who trade currencies: speculators and hedgers. Speculators are people who trade currencies with the intention of making a profit from price movements, while hedgers trade to protect themselves from a currency’s fluctuations by locking in an exchange rate for future transactions.

Speculators

Is someone who engages in short-term trades; they buy currencies with the intention of selling them later for a higher price. Speculators increase the demand for a currency when they believe that its value will rise in the future, or they sell it to take advantage of an anticipated decline. A speculator’s profit comes from being able to sell their purchase at a higher price than what they paid. Know more forex broker reviews

Hedger

Is someone who engages in long-term trades, typically with the intention of selling their currency at some predetermined future date. Hedgers protect themselves against fluctuations by locking in a price and selling it in the long term. 

 

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